Carriers, shippers and especially logistics providers face a dilemma with 3rd party pricing.  First, let’s define 3rd party pricing.  3rd party pricing is pricing that is applied when the shipment both originates and terminates to/from a location other than the customer’s facility.  Let me give a specific example.  Shipper A is located in Kansas City (good choice) and ships to customers across the country and also receives shipments from its suppliers.  Shipments from Shipper A are outbound prepaid (paid by Shipper A) and shipments into Shipper A are controlled by Shipper A and thus arrive inbound collect.

However, Shipper A has relationships with other companies that directly supply product to its customers, sometimes termed “drop shipped.”  When a shipment does not involve Shipper A’s facility in Kansas City, but Shipper A controls and pays for such a shipment, then 3rd party pricing applies.

Many carriers extend the same pricing to a shipper for outbound prepaid, inbound collect and third party shipments.  However, there is a trend where carriers recognize that third party shipments may carry additional costs and the potential for less volume on the pick-up and/or delivery exists. 

Logistics providers (3PLs), by their very nature typically use 3rd party pricing, unless they have customers where carriers have extended customer-specific pricing.  Carriers have begun discriminating 3rd party pricing for 3PLs as the carrier really doesn’t know the freight characteristics and potential costs of customers who use 3rd party pricing.  There have been instances where logistics providers have leveraged 3rd party pricing with a big client to share deep discounts with small clients and carriers are catching on.

In the future, 3Pls will have to implement strategies that don’t always rely on 3rd party pricing.  Carriers are becoming more sophisticated and do not want logistics providers to have customers who, on their own merit, can earn deep discounts afforded to larger shippers.  On the other hand, shippers need to carefully review their need for 3rd party pricing and if necessary, include vendor and/or customer locations specifically in contracts to ensure the carrier is giving the best deal possible.

With the ever-growing logistics industry, carriers are becoming more stringent in pricing and both 3rd party logistics providers and shippers need to be aware.